Investing.com - European stocks closed sharply lower Friday, as fear gripped the market ahead of highly anticipated talks between U.S. President Barack Obama and Republican lawmakers on how to resolve the country’s "fiscal cliff", while euro zone debt concerns weighed.
At the close of European trade, the EURO STOXX 50 plunged 1.37%, France’s CAC 40 dropped 1.21%, while Germany’s DAX 30 gave back 1.32%.
Investors remained concerned over the looming "fiscal cliff" in the U.S., approximately USD600 billion in automatic tax hikes and spending cuts due to come into effect on January 1.
There are fears the U.S. economy will fall back into a recession, unless a divided Congress and the White House can work out a compromise before then.
Meanwhile, markets were also jittery after official data on Thursday showed that the euro zone's economy shrank 0.1% in the third quarter, following a contraction of 0.2% in the preceding quarter. A technical recession is defined as two straight quarters of contraction.
Financial stocks were broadly lower, as shares in French lenders BNP Paribas and Societe Generale dropped 0.62% and 0.24%, while Germany's Deutsche Bank and Commerzbank retreated 0.39% and 0.54% respectively.
Also on the downside, Swiss-based STMicroelectronics tumbled 2.38% amid reports Europe’s largest semiconductor maker will probably decide against splitting itself into two units after disagreements between French and Italian executives over the breakup proposal.
SAP was one of the session's top gainers on the other hand, with shares jumping 1.66%, as the software company was said to be quickly growing its startup following of its big data platform HANA, signing 20 new firms to run production applications on it.
In London, FTSE 100 fell 1.27% in bearish trade.
Financial stocks were mixed, as shares in the Royal Bank of Scotland and Lloyds Banking added 0.09% and 0.13%, while Barclays and HSBC Holdings slipped 0.01% and 0.26%.
Elsewhere, mining giant Rio Tinto eased up 0.02%, while rival BHP Billiton fell 0.12%.
Copper producers were also mixed, with shares in Xstrata declining 0.20% and Kazakhmys adding 0.37%.
In the U.S., equity markets followed mixed with the Dow Jones Industrial Average added 0.27%, S&P 500 futures dropped 0.59% decline, while the Nasdaq 100 futures indicated a 0.06% dip.